Look for some consolidation before stocks retest all-time highs, chart analysts say

Following a strong May, where the S&P 500 surged 6.2% and the Nasdaq nearly 10%, analysts anticipate fresh all-time highs for the stock market this summer, although immediate breakouts are unlikely. Fundstrat's Mark Newton expects resistance near February highs, leading to a period of consolidation in mid-June before a push to new records, while Piper Sandler's Craig Johnson sees the market consolidating near May highs, setting up for potential breakouts and viewing dips as buying opportunities.

Analysis

The U.S. stock market demonstrated robust strength in May, with the S&P 500 index surging 6.2%—its most significant monthly gain since November 2023—and the Nasdaq Composite advancing nearly 10%. These advances have left the S&P 500 and Nasdaq 3.4% and 6.1% below their respective record highs from February (S&P 500 at 6,147.43) and December. Technical analysts, such as Mark Newton of Fundstrat, anticipate new all-time highs this summer but foresee a period of consolidation before any immediate breakout, citing likely resistance near these February highs for the S&P 500 and potential market consolidation in mid-June. Newton suggests that a breach of May highs (SPX 5,968.61, QQQ $526.48) could propel the SPX towards 6025-6150 and the QQQ towards $540, while also advising vigilance for any signs of a trend reversal as early as the upcoming week. Complementing this view, Craig Johnson of Piper Sandler noted the S&P 500 is currently consolidating near its May highs, as evidenced by Monday's close at 5,935.94, interpreting this as a setup for potential upward breakouts and advising that modest pullbacks to well-established support levels present buying opportunities, despite acknowledging that stocks appear somewhat stretched in the short term.

Key Decisions for Investors

• Investors should anticipate a period of market consolidation, particularly around mid-June, before potential new all-time highs later in the summer, suggesting patience for an immediate breakout is warranted.
• Modest market dips and pullbacks towards well-established support levels could be viewed as strategic buying opportunities, given the underlying optimistic technical outlook expressed by analysts.
• Vigilance is advised when indices approach previous record highs, such as the S&P 500's February peak of 6,147.43, and for potential trend reversal signals if near-term upside targets like SPX 6025-6150 or QQQ $540 are achieved after surpassing May highs.